Brazil's Petrobras will invest $224 billion on offshore oil

Petroleo Brasileiro SA, the Brazilian state-controlled oil company, plans to invest $224 billion through 2014 as it seeks to develop the Americas’ largest discovery in three decades and more than double output.

About 95 percent of the plan will be invested in Brazil, the Rio de Janeiro-based company said today in a regulatory filing. Petrobras said it expects to raise $58 billion through debt and equity sales over the five-year period, including a planned share sale this year. It plans to spend about $118 billion on oil exploration and production.

Petrobras is looking to fund the development of offshore reserves in the so-called pre-salt region off Brazil’s coast, home to discoveries including Tupi, the largest find since Mexico’s Cantarell in 1976. Chief Executive Officer Jose Sergio Gabrielli plans to double output to 5.38 million barrels a day by 2020, compared with 2.7 million barrels in 2010.

"This is not set in stone because they need to see how much they can raise in the share sale," Anisa Redman, an oil analyst at HSBC Holdings Plc, said today in a telephone interview from London. "They tend to revise these numbers."

Petrobras, Latin America’s biggest company by market value, plans to raise $25 billion in a share offering this year, which would make it the biggest stock sale in the Western Hemisphere in at least a decade. It also plans to buy 5 billion barrels of government-owned oil reserves with new stock.


Petrobras rose 39 centavos, or 1.3 percent, to 29.88 reais in Sao Paulo trading at 10:45 a.m. New York time. It earlier rose to 29.97 reais, the highest since June 10.

The oil producer kept its output estimate for the pre-salt area unchanged at 1.18 million barrels a day in 2020. It lowered its forecast for production in foreign oil fields to 323,000 barrels a day in 2020 from 632,000 barrels.

The production targets don’t include output from projects Petrobras hasn’t started yet, such as the Franco oil field it plans to buy from the government in July with stock. The government said May 12 it found 4.5 billion barrels of recoverable light oil at Franco, the largest discovery since Petrobras found Tupi in 2007.

Petrobras will also have a minimum 30 percent stake in any new exploration license in Brazil, according to legislation the Senate approved this month.

The company said it expects oil to average about $80 a barrel through the five-year period and that refining capacity will rise to 3.2 million barrels per day by 2020, from about 1.8 million barrels a day at present.

(Published by Bloomberg – June 21, 2010)

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